If substantial batch-level or product-level costs exist, then overhead allocation based on a measure of volume such as direct labor-hours

If substantial batch-level or product-level costs exist, then overhead allocation based on a measure of volume such as direct labor-hours alone: must be used for external financial reporting since activity-based costing cannot be used for external reporting purposes. will systematically overcost high-volume products and undercost low-volume products. will systematically overcost low-volume products and undercost high-volume products. is a key aspect of the activity-based costing model.


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